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THIS DOCUMENT IS IN FOUR PARTS. THIS IS PART I
Pursuant to a congressional request, GAO reviewed the
Agency for International Development's (AID) assistance projects in Russia,
focusing on whether: (1) individual AID projects met their objectives and
contributed to systemic reforms; (2) the projects had common characteristics
that contributed to their successful or unsuccessful outcomes; and (3)
AID adequately managed the Russian projects.
GAO found that: (1) some of the projects reviewed fully
met or exceeded their objectives, while other projects met few or none
of their objectives; (2) 3 AID projects contributed to fundamental structural
changes in Russia because they had sustainability built into their design
and they focused on national or regional issues; (3) the successful projects
had broad and strong support from all levels of the Russian government,
U.S. contractors with long-term physical presence in Russia, a broad scope
to maximize benefits, and specific sustainability objectives, and complemented
or supported Russian initiatives; (4) Russian officials' commitment to
reform in certain sectors was critical to project success; (5) the unsuccessful
projects were poorly designed and implemented and often had little or no
impact on problems; (6) AID made certain exceptions to its normal procedures
and processes in its desire to respond quickly to assist Russia; and (7)
AID failed to adequately manage some projects because of problems in delegating
management and monitoring responsibility to the Moscow AID office, inadequate
staff, and inadequate management information systems.
Report to Congressional Requesters
August 1995
FOREIGN ASSISTANCE - ASSESSMENT OF
SELECTED USAID PROJECTS IN RUSSIA
GAO-NSIAD-95-156
USAID Projects in Russia
Abbreviations
ARC - American Russian Center, University of Alaska-Anchorage
BCG - Boston Consulting Group
CNFA - Citizens Network for Foreign Affairs
GKI - State Committee of the Russian Federation for the Management
of State Property
IBTCI - International Business & Technical Consultants, Inc.
NIS - New Independent States
PADCO - Planning and Development Collaborative International
PIER - Partners in Economic Reform
PIET - Partners for International Education and Training
RCG-HB - RCG-Haggler Bailly
RPC - Russian Privatization Center
TVG - Tri Valley Growers
USAID - U.S. Agency for International Development
Letter
B-260365
August 3, 1995
The Honorable Benjamin Gilman
Chairman
The Honorable Lee Hamilton
Ranking Minority Member
Committee on International Relations
House of Representatives
The Honorable Sam Nunn
Ranking Minority Member
Permanent Subcommittee on Investigations
Committee on Governmental Affairs
United States Senate
This report responds to your request that we evaluate assistance
projects in Russia managed by the U.S. Agency for International
Development (USAID). Specifically, we determined whether (1)
individual USAID projects were meeting their objectives and
contributing to systemic reforms, (2) the projects had common
characteristics that contributed to their successful or unsuccessful
outcomes, and (3) USAID was adequately managing its projects in
Russia. In conducting our study, we reviewed
10 judgmentally selected projects with obligations of $64.6 million
as case studies and used audits and evaluations performed by the
USAID Inspector General.
BACKGROUND
The United States began providing limited assistance to the Soviet
Union in December 1990 to support the reform effort and then
increased assistance after the Soviet Union dissolved in December
1991. In October 1992, the Freedom for Russia and Emerging Eurasian
Democracies and Open Markets Support Act of 1992 (P.L. 102-511),
commonly known as the Freedom Support Act, was enacted. It further
increased assistance to the former Soviet Union and established a
multiagency approach for providing assistance. It also called for
the designation of a coordinator within the Department of State whose
responsibilities would include designing an assistance and economic
strategy and ensuring program and policy coordination among federal
agencies in carrying out the act's policies.
The Freedom Support Act sets forth the broad policy outline for
helping former Soviet Union countries implement both political and
economic reforms. It also authorized a bilateral assistance program
that is being implemented primarily by USAID. In January 1994, the
State Department Coordinator approved the first overall U.S.
assistance strategy for the former Soviet Union, and in May 1994, the
Coordinator approved the strategy specifically for Russia. This
strategy has three core objectives: (1) help the transition to a
market economy, (2) support the transition to a democratic political
system, and (3) ease the human cost associated with the transition.
As of December 1994, USAID had obligated $1.4 billion and spent $539
million for programs and projects in Russia since fiscal
year 1990.
USAID's assistance to Russia has focused on 13 sectors, such as
health care and housing, that support the three U.S. objectives.
Hundreds of U.S. contractors and grantees are responsible for
implementing individual projects in the 13 sectors.
RESULTS IN BRIEF
Projects have had mixed results in meeting their objectives. Some of
the USAID projects we reviewed fully met most or all of their
objectives, were contributing to systemic reform, and were
sustainable. Others did not have all or some of these attributes of
success.
The more successful projects had several characteristics in common:
(1) all levels of the Russian government provided broad and strong
support, (2) U.S. contractors had a long-term physical presence in
Russia, and (3) these projects had a specific sustainability
objective. Also, successful projects generally complemented or
supported ongoing Russian initiatives. Projects that did not meet
all their objectives lacked one or more of these characteristics,
were poorly designed and implemented, and often had little or no
impact on problems.
USAID did not adequately manage some projects it funded. The
devolution of management and monitoring responsibility from USAID's
Washington office to its Moscow office delayed decision-making and
created confusion among contractors. Furthermore, USAID's management
information systems were inadequate, and it did not adequately
monitor or coordinate some projects. USAID has taken steps to
overcome these problems, including terminating some unsuccessful
projects, refining its assistance strategy, and undertaking efforts
to improve project monitoring and evaluation.
In commenting on this report, USAID said that the difficult operating
environment in which it worked during the first 2 years of the
program in Russia cannot be overstated. We agree that USAID faced
numerous operating obstacles in getting this program underway, and
our observations on how well the projects performed should be seen in
that context.
PROJECT RESULTS HAVE BEEN MIXED
The 10 projects we reviewed showed mixed results in meeting their
objectives.
Two projects, coal industry restructuring and housing sector
reform, met or exceeded their objectives.
Five projects, voucher privatization, officer resettlement, small
business development, district heating, and agribusiness
partnerships. met some but not other objectives.
Three projects, health care, commercial real estate, and
environmental policy met few or none of their objectives.
1 The environmental policy project we reviewed was still in the
early implementation phase. USAID awarded the initial contract in
September 1993 to establish offices and technical support, but did
not sign the agreements to implement the actual project work until
April and September 1994. The projects will extend through September
1997.
PROJECTS THAT CONTRIBUTED TO
SYSTEMIC REFORM
Three of the 10 projects we examined were contributing significantly
to systemic reform, that is, they were making fundamental
structural changes. These projects were effecting change because
they had sustainability--benefits that extend beyond the project's
life span--built into their design and they focused on issues on a
national or regional scale.
A project can contribute to systemic reform without meeting all of
its objectives. Two projects, coal industry and housing sector
reform, contributed to systemic reform and met their objectives. The
privatization project contributed to systemic reform but did not meet
all its objectives.
HOUSING SECTOR PROJECT
The housing sector project helped Russian ministries and agencies
implement 38 laws, regulations, and decrees to reform housing
policies and practices. The Urban Institute, which implemented the
project, also completed a series of pilot projects related to housing
maintenance, mortgage lending, rent reform, and property rights.
Many of the activities affect the entire country or could be
replicated in additional cities. The project helped create new
institutions, strengthened existing ones, and distributed procedural
guides and manuals to local governments as a way to sustain the
reforms.
PRIVATIZATION PROJECT
The contract for implementing the voucher privatization project
called for Deloitte & Touche to establish 35 voucher clearing centers
in cities throughout Russia. This project encountered some
difficulty in meeting its initial time frames and establishing all
the centers, but overall the project was successful. The active
centers handled 70 million voucher transactions as part of Russia's
unprecedented privatization program, and over half the centers
participate in ongoing capital market activities.
COAL RESTRUCTURING PROJECT
Partners in Economic Reform (PIER), which implemented the coal
restructuring project, has facilitated movement toward the
transformation of the entire coal sector. PIER helped build a
consensus for reform among the Russian government, mine labor unions,
and mine management. It was also instrumental in facilitating a
World Bank review that could lead to a restructuring loan. To
sustain the project's contribution to systemic reform, PIER helped
establish long-term business relations between the Russian and U.S.
coal industries, formed a consortium of U.S. coal-related business,
and is involved in social safety net and new job-creation activities.
Finally, PIER helped facilitate the sale of U.S. equipment in
Russia.
PROJECTS WITH RELATIVELY LIMITED CONTRIBUTION TO SYSTEMIC
REFORM
Seven projects we examined did not contribute significantly to
systemic reform because they either did not meet their objectives,
were narrowly focused, or lacked sustainability.
SMALL BUSINESS
DEVELOPMENT PROJECT
The University of Alaska sought to help develop small businesses by
establishing American Russian Centers in four cities across the
Russian Far East. The centers' purpose was to help train
entrepreneurs, help form new businesses, and build lasting business
ties between the region and the United States. To become
self-supporting after USAID stopped funding, the centers planned to
develop partnerships with counterpart institutions. However, the
centers have so far been unable to attract alternative
funding.
ENVIRONMENTAL POLICY AND
TECHNOLOGY PROJECT
CH2M Hill International Services, Inc., signed a contract in
September 1993 for an environmental policy development and technology
project. The contractor had difficulty filling critical staff
positions in Russia and providing required work plans for the
activities. Of the work plans due in November 1994, one was approved
in May 1995, while the other was still being revised as
of June 1995.
HEALTH CARE TRAINING PROJECT
The project to provide health care financing training in the United
States to Russian health professionals was implemented by Partners
for International Education and Training (PIET), several training
institutions, and USAID. Although PIET and the institutions provided
the training as required, the Russian participants did not have the
authority, expertise, or resources to make systemic changes. In
addition, changes in Russia's health reform plans have made the
training irrelevant.
COMMERCIAL REAL ESTATE PROJECT
A commercial real estate project, implemented by International
Business & Technical Consultants, Inc. (IBTCI), was intended to
create a standard approach for increasing the availability of
commercial real estate in six Russian cities. The project design
called for a pilot project] roll-out concept, but IBTCI did not roll
out the pilot in any of the cities and used a different approach in
each city. Also, Russian officials said the project had little or no
effect on the availability of commercial real estate in
their cities.
DISTRICT HEATING PROJECT
The district heating project, which USAID recommended we review, was
implemented by RCG-Haggler Bailly and met its objectives primarily by
conducting energy audits and training as well as providing energy
efficiency equipment to two Russian cities. However, as of February
1995, some of the equipment in one of the cities had not been
installed. Russian officials said the equipment may never be
installed because Russian authorities never certified it. USAID had
not monitored the use of the equipment or followed up on the impact
of the studies produced for the project. Consequently, we found no
indication that the project contributed to systemic reform in the
energy efficiency area.
AGRIBUSINESS PARTNERSHIPS PROJECT
The agribusiness partnerships project, implemented by Tri Valley
Growers, helped two U.S. companies establish joint ventures in two
Russian cities. Although the involvement of U.S. companies
increased the probability that the business ventures would be
sustained, the limited scope of the partnerships makes it unlikely
that they will have a significant effect on reforming Russia's
agricultural sector. USAID has discontinued the entire agribusiness
partnerships project in Russia.
OFFICER RESETTLEMENT PILOT PROJECT
The Russian officer resettlement pilot project was not intended to be
sustainable after its completion, but instead was motivated by the
United States' desire to encourage the withdrawal of Russian troops
from the Baltic countries. The $6-million pilot project objective
was to construct 450 housing units to resettle demobilized officers
by July 1994. As of February 1995, 422 units were either occupied or
available for use, so in that sense the project was successful.
The Baltic countries are Latvia, Lithuania, and Estonia. The
United States never officially recognized them as part of the former
Soviet Union.
COMMON THEMES TO SUCCESSFUL
PROJECTS
Successful projects (1) had strong support and involvement at all
levels of the Russian government, (2) had a long-term physical
presence by U.S. contractors in Russia, and (3) were designed to
achieve maximum results by supporting Russian initiatives, having a
broad scope, and including elements that made them sustainable. A
critical element to a project's success was the degree to which
Russian officials were committed to reform in the particular
sector.
STRONG SUPPORT AND
INVOLVEMENT AT ALL RUSSIAN
LEVELS
Russians at both the federal and local levels demonstrated a strong
commitment to the projects that were contributing to systemic reform.
The Russian government also provided financial or in-kind support,
and Russian nationals held leadership roles in the projects. For
example, PIER's approach to implementing the coal project included
working with officials in the Ministry of Fuel and Energy, Fund of
Social Guarantees, and the federal coal company; academic
institutions; oblast' and city officials in the two targeted
regions; local mine management; and representatives of two labor
unions. Russian nationals served as codirectors, and PIER staff
received free apartments and office space.
To accomplish the housing sector reform project, the Urban Institute
worked closely with officials in the Ministries of Finance and
Economy and the State Committee on Architecture and Construction at
the federal level, the Moscow city government, various maintenance
firms, banks, and grass-roots condominium associations. Although
office space in Moscow is expensive and scarce, the Institute
received free office space. In addition, Russian nationals played a
key role on the Institute's staff.
In contrast, many less successful projects lacked the buy-in of
Russians at either the local or federal level and had little Russian
involvement or contribution. For example, the State Committee of the
Russian Federation for the Management of State Property (GKI),
Russia's federal agency overseeing the privatization effort, was
instrumental in designing the voucher clearing and commercial real
estate projects. However, in some cities, local officials were not
involved in designing the projects and had little interest in them;
as a result, these projects were not fully successful.
The officer resettlement project established housing in several
cities, but not in Novosibirsk, where city officials reneged on a
previous administration's commitment to provide needed infrastructure
support. Because officials at the federal and oblast' levels were
not involved in the initial agreements, they had no authority to
require the new city administration to fulfill the contract, nor were
they willing to provide additional funding for the project.
The district heating project was not completed in Yekaterinburg
because local officials did not allow monitoring equipment to be
installed. They said the proper Russian authorities had not
certified the equipment.
Oblasts, krays, and republics are regional administrative units
similar to states in the United States.
GKI is a Russian acronym.
LONG-TERM PRESENCE BY U.S.
CONTRACTORS IN RUSSIA
The successful projects usually had long-term advisers living in
Russia, which enabled the advisers to build trust, learn about local
conditions and plan accordingly, monitor progress closely, and
correct problems as they occurred. In addition, successful projects
involved contractors that had appropriate experience to carry out the
project. For example, the Urban Institute has had two long-term
advisers living in Moscow since 1992 who maintained close contact
with Russians involved in housing reforms. PIER's project director
had lived in Moscow for 3 years. Other members of its American staff
had lived in Kemerovo and Vorkuta, the key cities of the major coal
mining oblasts, since 1993 and 1994, respectively. The two field
staff have years of experience as coal mine engineers. Russian
officials at all levels (1) praised PIER's staff; (2) described
PIER's assistance as timely, well-targeted, and beneficial; and (3)
wanted the project to continue and expand.
Contractors implementing many of the less successful projects did not
have staff living in the Russian cities being assisted. For example,
neither IBTCI nor RCG-Haggler Bailly had permanently assigned
American staff in the cities being assisted. IBTCI's consultants
would fly in, make rapid diagnoses, deal with problems quickly, and
then leave. Many U.S. officials, Russians, and contractors said
that relying on "fly-through" consultants rather than permanent staff
was an ineffective approach.
DESIGNED TO MAXIMIZE RESULTS
Successful projects, the housing reform, voucher privatization, and
coal industry restructuring--were designed to be sustainable, have a
widespread effect, and support existing initiatives. Each project
supported ongoing Russian efforts at widespread reform, considered
local conditions, and contained elements to sustain the effects of
the project beyond its life span.
In contrast, some projects were not designed to maximize their
potential impact. For example, the project design required
RCG-Haggler Bailly to provide energy efficiency equipment and audits
but did not include methods to replicate the project in other cities,
or extend monitoring efforts to determine how the equipment or
studies were used. The USAID Inspector General reported that other
projects did not include any follow-up steps to ensure that the
assistance provided was used. In addition, projects focusing on
health care training and commercial real estate leasing did not
consider local needs and conditions and thus had limited
impact.
Several projects did not adequately identify outcomes or measurable
results. For example, the Tri Valley Growers' contract with USAID
did not stipulate how many agribusiness partnerships were to be
established. The design of the coal project also did not adequately
identify outcomes or measurable results, but PIER developed an
effective project nonetheless. The USAID Inspector General found
similar problems when reviewing many projects in the region.
Audit of the Bureau for Europe's Technical Assistance Contracts
(Report No. 8-180-93-05, June 30, 1993); Audit of the Distribution
of Emergency Medical Supplies to the New Independent States Under
USAID Cooperative Agreement With the People-to-People Health
Foundation "Project Hope" (Report No. 8-110-94-006, Mar. 17, 1994);
and Audit of Activities to Improve Crop Storage Systems in the New
Independent States (Report No. 8-110-94-014, Aug. 31,
1994).
Audit of the Bureau for Europe's Technical Assistance Contracts
Report No. 8-180-93-05, June 30, 1993; Audit of the ENI Bureau's
Monitoring, Reporting and Evaluation System (Report No.
8-000-95-002, Nov. 28, 1994); and Audit of Selected Privatization
and Restructuring Activities in Russia (Report No. 8-118-95-007,
Mar. 10, 1995).
RUSSIAN INVOLVEMENT AND
COMMITMENT
It is widely acknowledged that the Russian people themselves will
determine the ultimate success or failure of political and economic
reforms. Without their involvement and commitment to change, outside
assistance will have a limited effect. For example, the support and
involvement of Russian federal agencies, such as GKI in the privatization
effort and the ministries related to housing, ensure that projects in
those sectors are likely to have a wide and sustained effect. The coal
project's impact depends on Russia's commitment to restructure the coal
industry.
In several sectors, a Russian commitment to reform remains elusive.
Powerful factions in the Russian legislative branch strongly oppose land
reform, and the Ministry of Health has not demonstrated a commitment to
health care reform. This lack of commitment raises concerns that projects
in the agriculture and health sectors will not have widespread benefits.
USAID is now working with the Ministry of Environmental Protection and
Natural Resources, but the level of support from other important federal
ministries, including the Ministry of Finance, is still
questionable.
Other domestic conditions will also influence a project's success.
Russia's commitment to breaking up monopolies and its ability to attract
capital for modernizing outdated equipment, restructuring existing state
enterprises, and starting new businesses will affect the pace and scope of
Russia's transformation to a market economy. Moreover, projects such as
introducing mortgage lending will depend on macroeconomic policy and land
reforms. Russia is counting on foreign capital to help move the
transition process forward, but such factors as the unstable economic
situation, a poor and uncertain tax structure, an undeveloped financial
market infrastructure, and an increased crime rate make foreign investors
hesitant to invest.
USAID MANAGEMENT PERFORMANCE
USAID responded quickly to assist Russia in undertaking its political and
economic reforms, as called for in the Freedom Support Act. However, to
respond quickly, USAID made certain exceptions to its normal procedures
and processes. Although USAID provided a quick and flexible response to a
fluid, unpredictable situation, we identified several management problems
in addition to design problems that occurred, in part, because of the
quick response. USAID officials agreed that management problems occurred,
but they said the risks associated with not responding
quickly were high.
Congress granted USAID special authority to provide a quick response.
Section 201 of the Freedom Support Act of 1992 amended the Foreign
Assistance Act by adding chapter 11, section 498B, that waived provisions
of law in providing assistance to the former Soviet Union.
LACK OF MONITORING AND EVALUATION
The large size of USAID's program, the vast geographic area receiving
assistance, and staff limitations have prevented adequate monitoring in
some cases. We found that USAID officials were unaware of positive and
negative aspects of the projects implemented by IBTCI, RCG-Haggler Bailly,
and PIER. USAID officials had not visited some projects, and USAID did
not have representatives located outside Moscow. USAID expected its
Russian staff to conduct field monitoring, but the Russian nationals
lacked the necessary training. USAID officials said they considered but
rejected the idea of establishing field offices outside
Moscow.
Without adequate staff, USAID relied mainly on contractors' written and
oral reports to monitor the projects, but some contractors did not report
all problems. The USAID Inspector General also found shortcomings in the
reporting process: contractors were not required to report on their
progress toward specific objectives or indicators.
Moreover, USAID did not enforce some of its reporting requirements. For
example, Deloitte & Touche did not provide the required lists of equipment
purchased with USAID funds and brought into the country, and USAID did not
enforce the requirement.
Although the State Department allowed USAID-Moscow to increase U.S.
direct-hire personnel and personal services contractors from 27 in fiscal
year 1993 to 66 in fiscal year 1995, USAID officials said even more staff
were needed to adequately monitor the program. However, State would not
allow the USAID mission to grow further because, among other reasons, the
USAID assistance program is scheduled to end by the end
of the decade.
In some cases, USAID had not determined the relative success or failure of
projects so that it could apply lessons learned to other efforts. It did
not conduct the required periodic assessments evaluations of the coal and
agribusiness projects. The omnibus contracts\10 do not require an
evaluation of the individual tasks, but instead evaluations are to be done
at the end of the contracts, according to USAID officials. The omnibus
contracts for USAID's private sector initiatives alone have obligated
approximately $200 million and are not scheduled to terminate until 1996,
too late to apply lessons learned. In addition, an evaluation that was
conducted was not accurate. A contractor evaluated the district heating
project in June 1993 and gave it high marks. Our 1995 review of the
project found major shortcomings, such as equipment still in boxes after
being delivered in 1993, even though the evaluation report said the
equipment had been installed and was being used. The USAID Inspector
General also found that evaluations had not been conducted and that the
quality and impact of some project evaluations were questionable.
Audit of Selected Privatization and Restructuring Activities in Russia
(Report No. 8-118-95-007, Mar. 10, 1995) and Audit of the Distribution
of Emergency Medical Supplies to the New Independent States Under USAID
Cooperative Agreement With the People-to-People Health Foundation "Project
Hope" (Report No. 8-110-94-006, Mar. 17, 1994).
USAID's Europe and the New Independent States Bureau often procured U.S.
technical assistance through multipurpose contracts, commonly referred to
as "omnibus" contracts. These contracts provided for the performance of
activities, many of which needed to be further defined. USAID used the
omnibus contracts to retain the services of U.S. companies to mobilize,
either in-house or through subcontractors, the resources and expertise
needed to identify and implement project activities. The description of
work in these contracts was very general, but required subsequent
development of "task orders" and "work plans" to further define the
activities the contractor was to perform.
Audit of the ENI Bureau's Cooperative Agreement With World Learning, Inc.
for Support to Non-Governmental Organizations in the New Independent
States of the Former Soviet Union (Report No. 8-110-95-008, Mar. 10,
1995).
PROBLEMS ASSOCIATED WITH DELEGATED AUTHORITY
The devolution of management and monitoring responsibility from
USAID's Washington office to a rapidly growing Moscow office has not
been smooth, and several problems have developed as a result. First,
as USAID's Moscow office assumed more management responsibility,
contractors had to begin dealing with another layer of management
review. This caused delays and confusion among some contractors.
Second, there were tensions between the Washington and Moscow offices
because of differences regarding program implementation. For
example, the offices disagreed about which reformers and Russian
government agencies to work with. Third, the USAIDMoscow office
lacked some essential documents to enable officials to carry out
their duties. We found that key contract and financial documents
were not available in Moscow, a problem also reported by the USAID
Inspector General.
The State Department Coordinator opposed giving greater authority to
USAID-Moscow because he believed USAID-Washington needed to maintain
a more prominent role. He said that because assistance to Russia is
an important foreign policy issue, key decisions should not be
delegated to the field. State and USAID-Washington officials said
they needed quick access to important project data for reporting
purposes, but quick access to data could not be ensured when projects
were managed by the USAID-Moscow office.
Audit of the Bureau of Europe's Technical Assistance Contracts (Report No.
8-180-93-05, June 30, 1993) and Audit of the ENI Bureau's Monitoring,
Reporting and Evaluation System (Report No. 8-000-95-002, Nov. 28,
1994).
LACK OF ADEQUATE INFORMATION SYSTEMS
USAID has not yet developed a good management information system for its
Russia program. The USAID Inspector General reported that USAID lacked an
information system with baseline data, targets, time frames, and
quantifiable indicators by which to measure program progress and results.
USAID's Bureau for Europe and the New Independent States was exempted from
a new agencywide management system because the program was intended to be
short term and regional rather than long term and country-specific. USAID
officials said the pressure to provide assistance quickly meant forgoing
the traditional project design process, which included developing progress
indicators.
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation System
(Report No. 8-000-95-002, Nov. 28, 1994).
POOR FIELD COORDINATION
Part of USAID's assistance strategies was to focus on areas where
reformers were willing to make changes. USAID believed this would help
create a synergy that could stimulate the overall impact
of the projects.
Some contractors were not aware of each others' activities. USAID's
management information system did not list contractors by region, and
USAID sometimes did not tell new contractors about other contractors'
activities. In some cities, contractors contacted each other on their own
and started coordinating their efforts. However, this was being done on
an ad hoc basis. In Vladivostok and Yekaterinburg, U.S. Consuls General
facilitated contractor coordination. The USAID Inspector General found
that many projects with similar goals were not linked to one another. Poor
coordination reduced the opportunity to achieve synergy and targeted
impact and gave some Russians the impression U.S. assistance was
fragmented and uncoordinated.
Audit of ENI's Strategy for Managing Its Privatization and Restructuring
Activities in Russia (Report No. 8-118-95-009, Mar. 17,
1995).
The Russian government has no agency to coordinate assistance efforts
within the country.
RECOMMENDATIONS
We recommend that the USAID Administrator focus assistance efforts on
projects that (1) will contribute to systemic reforms; (2) are designed to
be sustainable; (3) are supported by all levels of Russian government; and
(4) whenever possible, use American contractors with an in-country
presence.
AGENCY COMMENTS AND OUR EVALUATION
In commenting on a draft of this report, USAID said the three projects
that we had deemed to have not met their primary objectives did produce
some positive benefits or it was too early to tell the impact the projects
would have. USAID also said it was aware of the problems that have
occurred and has taken steps to correct them or terminate activities that
could not be fixed. USAID pointed to a new computerized monitoring system
that is expected to produce its first report in November
1995.
USAID agreed with our recommendation regarding the focus of its assistance
projects and said it was taking steps to implement it. In addition, USAID
said it was taking corrective action to address the management problems we
identified. However, it stressed that its assistance has had a positive
impact and occurred in a difficult operating environment. USAID indicated
that it had made progress in setting up its own monitoring, reporting, and
evaluation system. It should be pointed out, however, that in November
1994, the USAID Inspector General reported that the system was still far
from able to measure program results.
USAID said that our report would have provided a more balanced and
accurate view of the systemic impact and sustainability of a project's
activities if we had considered the activity in the context of the whole
program. USAID stated that, in nearly every case, the individual projects
we focused on were part of a larger project or program that would have
substantial impact on reforming Russia's economy. USAID is correct that
the projects we examined were usually one component of a larger sector
program; however, USAID is incorrect in its assertion that we evaluated
projects in isolation and without considering the context of the whole
program. The overriding objective of USAID's program in Russia is to
contribute to reforming both the political and economic systems. This is
also the objective of the assistance program for each sector and, with few
exceptions, of each project that supports a sector program. Our
examination focused on the individual building blocks that support sector
programs and ultimately support the reform effort in Russia. In some
cases, we found that the individual building blocks will not contribute to
systemic reform in the sector or in Russia overall. Even though this does
not mean that an entire program, of which a less-than-successful project
is a part, will fail in its systemic reform objective, it does mean that
an unsuccessful project is not contributing to a program's
success.
We also disagree with USAID's assertion that significant systemic reform
has resulted from USAID activities in all sectors. For example, the
agribusiness partnerships project, including components reviewed by the
USAID Inspector General, comprises most of the USAID funding going to the
sector but is not expected to contribute significantly to systemic
reforms. Only a limited degree of systemic reform has occurred in other
sectors as well, including the health care and the environmental sectors.
We believe that a sector evaluation, although useful in its own right,
would not have allowed us to draw conclusions about the role and
contribution of individual projects.
USAID provided other comments that we incorporated into the report where
appropriate. The full text of USAID's comments is reprinted in appendix
IV.
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation
System (Report No. 8-000-95-002, Nov. 28, 1994).
SCOPE AND METHODOLOGY
We judgmentally selected 10 individual projects from 6 sectors to review
as case studies. We selected projects based on their geographic
distribution, focusing on regions where several projects were
concentrated. We also considered the level of obligations and
expenditures; the type of assistance provided (e.g., training, technical
assistance, and product delivery); and the type of contracting vehicle
(e.g., cooperative agreements, grants, and contracts). We generally did
not review projects examined by the USAID Inspector General, although we
analyzed its work to assess whether common themes emerged. (See app. II
for a list of the 10 projects we studied and USAID Inspector General
reports we reviewed.)
We analyzed USAID and project documents and interviewed USAID and other
U.S. government officials, U.S. contractors, Russian counterparts, and
beneficiaries. We visited project sites in Western Russia, Siberia, and
the Russian Far East in November 1994 and February 1995.
Appendix III provides a detailed analysis of the 10 projects in our case
study.
We conducted our work from September 1994 to April 1995 in accordance with
generally accepted government auditing standards.
As agreed with your offices, unless you publicly announce this report's
contents earlier, we plan no further distribution of this report until 30
days after its issue date. At that time, we will send copies to the
Secretary of State, the Administrator of USAID, and other interested
congressional committees. Copies will also be made available to others on
request.
Please contact me at (202) 512-4128 if you or your staff have any
questions concerning this report. Major contributors to this report are
listed in appendix V.
Harold J. Johnson, Director
International Affairs Issues
OBLIGATIONS AND EXPENDITURES FOR ASSISTANCE TO RUSSIA
In his January 1995 annual report, the State Department Coordinator
reported about $2.9 billion in obligations and $1.8 billion in
expenditures for Russia through December 1994. (See table I.1.) Between
fiscal years 1990 and 1994, the U.S. Agency for International Development
(USAID) allocated assistance to the New Independent States (NIS) as a
region. During that time, most projects spanned different countries and
USAID did not track how much money was obligated or expended by country.
Thus, USAID country attributions are estimates and should be treated as
such. In fiscal year 1995, USAID began keeping country
accounts.
Table I.1
Obligations and Expenditures for
Assistance to Russia (Fiscal Years 1990
through 1994)
(Dollars in millions)
Agency Obligations Expenditures
USAID direct $1,230.0 $440.4
USAID transfers and allocations 171.1 98.1
to other agencies
USAID subtotal 1,401.1 538.5
Department of Defense 291.0 72.9
Department of Agriculture 1,192.0 1,192.0
Total $2,884.1 $1,803.4
Source: Department of State.
PROJECTS AND USAID INSPECTOR
GENERAL REPORTS GAO REVIEWED
We reviewed 10 projects in depth as part of our review. In addition, we
reviewed various reports that USAID's Inspector General has issued on
management issues and projects in Central and East Europe and the former
Soviet Union. The 10 projects and the USAID Inspector General reports we
reviewed are listed in table II.1.
Table II.1
Projects GAO Reviewed
(Dollars in millions)
Start End
Project-implementing partner date date Obligations
Housing policy reform-Urban Sept. Aug. $5.8
Institute 92 94
Voucher privatization Feb. June 4.1
Deloitte & Touche 93 94
Coal project-Partners in June Aug. 8.0\a
Economic Reform 92 95
Small business development Apr. May 95 5.1
American Russian Center, 93
University of Alaska
Environmental policy & Apr. Sept. 26.4\b
technology 94 97
CH2M Hill International
Services
District heating-RCG Haggler Feb. Dec. 1.3
Bailly 92 93
Health care training-Partners Fall Fall 0.7
for International Education 93 93
and Training
Commercial real estate Oct. Dec. 2.0
International Business & 93 94
Technical Consultants, Inc.
Agribusiness partnerships-ri Feb. Sept. 5.2\a
Valley Growers 93 97\c
Russian officer resettlement July July 6.0
Planning and Development 93 94\e
Collaborative International
$64.6
Note: Obligations are as of March 1995.
a Amount could be applied to other countries in the NIS as well as
Russia.
b Total estimated amount of three contracts.
c USAID stopped accepting proposals for partnerships in Russia in
September 1994.
d Primary implementing partner.
e Project had not been completed as of April 1995.
The following are the USAID Inspector General reports
GAO reviewed.
Audit of the Bureau for Europe's Technical Assistance Contracts
(Report No. 8-180-93-05, June 30, 1993).
Audit of the ENI Bureau's Monitoring, Reporting and Evaluation
System (Report No. 8-000-95-002, Nov. 28, 1994).
Audit of ENI's Strategy for Managing Its Privatization and
Restructuring Activities in Russia (Report No. 8-118-95-009,
Mar. 17, 1995).
Audit of Selected Privatization and Restructuring Activities in
Russia (Report No. 8-118-95-007, Mar. 10, 1995).
Audit of the Reestablishment of Vaccine Production Activity Under
the New Independent States Health Care Improvement Project No.
110-0004 (Report No. 8-110-94-004, Feb. 25, 1994).
Audit of the Medical Partnerships in Russia and Health Information
Clearing House Activities Under the New Independent States
Health Care Improvement Project (Report No. 8-110-94-005, Feb.
28, 1994).
Audit of the Distribution of Emergency Medical Supplies to the New
Independent States Under USAID Cooperative Agreement With the
People-to-People Health Foundation "Project Hope" (Report No.
8-110-94-006, Mar. 17, 1994).
Audit of the Vulnerable Groups Assistance Program in Russia Under
Project No. 8-110-0001 (Report No. 8-110-93-08, Sept. 24,
1993).
Audit of Activities to Improve Crop Storage Systems in the New
Independent States (Report No. 8-110-94-014, Aug. 31,
1994).
Audit of the ENI Bureau's Cooperative Agreement With World
Learning, Inc., for Support to Non-Governmental Organizations in
the New Independent States of the Former Soviet Union (Report
No. 8-110-95-008, Mar. 10, 1995).
Audit of the Department of Commerce's Special American Business
Internship Training Program in the New Independent States
(Report No. 8-110-93-10, Sept. 24, 1993).
Audit of the Department of Commerce's Consortia of American
Businesses in the New Independent States Program (Report No.
8-110-93-11, Sept. 24, 1993).
Audit of the Nuclear Regulatory Commission's Technical Assistance
Activities in Russia (Report No. 8-118-94-012, June 28,
1994).
Audit of the Department of Energy's Nuclear Safety Technical
Assistance Activities in Russia and Ukraine (Report No.
8-110-95-001, Oct. 7, 1994).
PROJECT SUMMARIES
The following provides a detailed analysis of each project that we
reviewed. We selected one project in each of the following areas: (1)
housing policy reform, (2) voucher privatization, (3) coal, (4) small
business development, (5) environmental policy and technology, (6)
heating, (7) health care, (8) commercial real estate, (9) agribusiness
partnerships, and (10) officer resettlement. Each summary contains
information on the problems in the sector, USAID's project objectives for
the selected contract, and the project approach used by USAID or the
contractor. We also provide our assessment of the contractor's
performance, the impact on systemic reform, and USAID's management of the
contract. The projects are presented on the basis of their capacity to
contribute to systemic reform.
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